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The Four Cardinal Virtues of Trading, pt 5 of 5
Fortitude: The Virtue of Guts
Wingmen and Quarterbacks Aren't Sissies
Trading is not for sissies. This is one of the seeming contradictions of the third virtue of being a good sport. At it's worst, it could be perceived as a sissified virtue. On the other hand, trading is not for testosterone driven tough guys, and this fourth virtue of guts could be misconstrued as the testosterone virtue. It's not.
Let's return to the hockey rink for a moment. It takes a large measure of bravery to focus on the puck, waiting until the very last moment when your opponent has absolutely committed himself, to pass the puck to a team mate driving for the net. The price of that patience is going to be the pain of being taken out against the boards. But, there is a possibility that the pain will be offset by a goal.
This same sort of fortitude can be seen every Sunday of football season as quarterbacks stand in the pocket until the very last moment before throwing the ball.
Neither Are Good Traders
This same sort of fortitude--guts if you will--can be found in good traders who have the patience to wait for their setup before trading and likewise wait for their exit signal to get out of a trade (or conversely, go ahead and follow the exit signal even though their gut is telling them to stay in.)
Trading coaches say one of the most common problems in trading is failing to "pull the trigger." When it finally comes time to trade, some traders cannot do it. These traders need to learn the virtue of guts.
Most trading systems result in roughly half the trades being losers and half winners. A good trader has to have the guts to be able to repeatedly lose in order to be in a position to take advantage of a great winner.
So what's the difference between gutsy trading a testosterone driven trading? The gutsy trader trades on the market's terms, waiting for the market to show weakness, strength, or trend, before jumping in, being willing to take losses as easily as winners. The testosterone trader tries to out-muscle the market at its own game.
Summary: Balance
The four virtues of common sense, moderation, being a good sport, and guts cannot be viewed individually. In a sense it is false to speak of four virtues; rather they are four facets of virtue. One cannot have virtue without having all four. This is the art of balance.
Finding the Missing Virtue
If you are having trouble as a trader one strategy might be to figure out which virtue you are missing. Self examination might reveal that you are a good sport and that you have guts as well as common sense. But it's not so easy uncovering our faults. Only a deliberate self-analysis will reveal that you lack moderation, for instance. And guts without moderation leads to a type of trading that looks like it might be testosterone driven, for instance.
Working on one virtue at the expense of the other virtues results in the anomaly of the three sided square--an enclosed object with one side missing. Each virtue requires the other three to be effective.
The Virtuous Trader as Juggler
I suspect very few traders are actually missing any of the basic components of virtue. "Finding the Missing Virtue" is therefore a misnomer. All the components are there, it's just a matter of getting everything in balance and in sync. Juggling three balls is pretty simple, as far as juggling goes. Adding a fourth ball changes the dynamics and timing of the act. That's the art of virtue. The virtuous trader is not an explorer searching for missing elements; the virtuous trader is a juggler bringing all the elements into a single, flowing movement.
Copyright © 2004 James E. Nelson (Just Another Jim). All Rights Reserved.
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